News analysis

HSBC's Geoghegan quits

Trouble at the top

UPDATED with HSBC's confirmation of Mr Geoghegan's departure and the appointment of a new chief executive and chairman.

A SMOOTH chairman and a scrappier chief executive. For Stephen Green and Mike Geoghegan, HSBC's top two since 2006, now read Douglas Flint and Stuart Gulliver. Mr Green's departure at the end of the year to become a minister in Britain's coalition government has triggered a boardroom drama at the bank. Mr Geoghegan reportedly wanted to move upstairs himself, to be replaced as chief executive by Mr Gulliver, the head of HSBC's investment bank. But whether Mr Geoghegan is really cut out for the clubbable side of chairmanship is far from clear: drinks receptions and vapid speechmaking do not come naturally to him.

Leaving him in the CEO's chair would have been difficult too. HSBC likes to promote from within, which would have entailed someone leapfrogging Mr Geoghegan. Mr Flint is the bank's finance director and reports to Mr Geoghegan; that role reversal would have been uncomfortable. In the end, the board opted for new faces in both roles.

Unexpectedly fast though their elevations are, the combination looks pretty sound. Both know the bank inside out—they have 45 years' experience at HSBC between them. Sceptics might argue that Mr Flint lacks operational banking experience and deep knowledge of China, but he is a safe pair of hands and well-known to Britain's Financial Services Authority, which is HSBC's lead financial regulator. Mr Gulliver may not be steeped in retail banking, but he has notched up tons of time in Asia and can point to a decent risk-management record for his bit of the business during the crisis.

True, the process has been very messy. A double changeover at the top was not what the bank planned. If Mr Geoghegan did not make a suitable chairman, someone forgot to let him know. But despite fumbling by the board, HSBC's succession still has two big pluses in comparison with some other recent changes at the top of European banks.

The first is that the bank could call on a credible pool of internal talent to step into its two biggest jobs. Contrast that with the uncertainty over who will replace Alessandro Profumo at UniCredit, ousted earlier this week, or Eric Daniels, whose departure from Lloyds Banking Group was also announced this week. Contrast it too with the promotion of Bob Diamond to become the next chief executive of Barclays. HSBC had a credible alternative to Mr Geoghegan; it is not clear that the same could be said of Mr Diamond.

The second thing that HSBC can point to is that its strategy is solidified by the change at the top. Despite Mr Gulliver's investment-banking background, he is not about to try to turn HSBC into a bulge-bracket firm: he tried that earlier in the decade and didn't get anywhere, instead tilting the investment bank towards emerging markets before the rest of HSBC followed. Leadership changes at other banks coincide with big questions about their future strategy: will UniCredit retrench? Will Lloyds expand abroad? Can Barclays reduce its reliance on the investment bank? For HSBC, its emphasis on corporate and retail banking, with a particular focus on emerging markets, is not in question. It has a bit of egg on its face, but nothing worse.

@HiNu: You quote two sources to back Tao. The first one is an abstruse mixture of conspiracy theories. Need an Example?

"After the second Opium War which ended in 1860, the British merchant banks and trading companies established the Hong Kong and Shanghai Corporation as the central bank of the Far East drug industry. According to all research I have read about the drug network, the Hong Kong and Shanghai Bank, with its global connections, continues to be a financial centre for the drug industry to this day."

"Today the Far East heroin trade is still organized by the Freemasons through their interconnected agents, the Triads."

The second source you quote does not make a point on a direct connection between the HSBC and opium, let alone "financing Opium trade between Hong Kong and Shanghai China".

I don't object your opinion in general, in fact, i even doubt the HSBC hat NO connection to opium, but some serious sources would be nice before you call others a "fool".

To be fair, every organisation has inception history; it's the recent and current affairs that's relevant. Taipans were the victors, villians and even today own many regional and global organisations. Looking at how the USA is extending its military and economic powers globally in haphazard way, and as a comparison to the British empire stretch in the past, it must be just amazing to be a British then. Any things and everything was possible.
HSBC has had been in the midst of software transformation from the articled clerks to the highly educated guys (e.g Stephen Green and Gulliver). Geoghegan, as a veteran banking retailer in Asia, will be highly prized and sought by global and Asian banks for his insights.
lphock

This is a bit of a vapid and flatly written piece. I've been finding too many in the Economist of late (the recent rather weak article on Bob Diamond's promotion at Barclays springs to mind), which I was I'm seriously considering canceling my subscription to The Economist. I am surprised - inter alia - that you make no mention of the UK government's Independent Banking Commission, whether UK-govt supported deposit takers should be permitted to engage in so-called "casino banking" at all, what we should make of the recent threats HSBC has been making to move its HQ overseas, or whether there might be something wrong with always promoting from within.

Don't know how they operate at the high level, but this bank is the world's worst in serving small, individual accounts. Exists primarily to extract exorbitant fees, at least in my experience.

Does things like approve online transactions after a deposit is made, then hit the account with NSF fees because it hadn't officially cleared said deposit. I would love to see this operation become defunct soon.

I don't really see the importance of this article. Is HSBC in some way vital to Britain's economy? I see that knowledge of China is important within the bank so does that mean the bank will help Britain tap into China's markets? Why is this article so central to Britain?